Cost Squeeze Challenges Cow-Calf Producers

Fri, 2010-11-05 12:26

There’s a cost squeeze crushing cow-calf producers, brought on largely by ethanol-driven increases in feed, fuel and fertilizer, as well as sharp increases in land prices driven by a changing rural landscape of non-traditional

There’s a cost squeeze crushing cow-calf producers, brought on largely by ethanol-driven increases in feed, fuel and fertilizer, as well as sharp increases in land prices driven by a changing rural landscape of non-traditional recreational landowners.

That’s the consensus of a panel of producers and analysts who addressed the Texas Cattle Feeders Association annual convention last week in Oklahoma City.

According to Steve Swigert, a Nobel Foundation ag economist in Ardmore, OK, cow costs have increased markedly in the last 15 years. Referencing Standardized Performance Analysis (SPA) data, he says annual cow costs have increased from the middle $300 range to as high as $550 or more recently. And that affects thoughts of herd expansion. “Cow-calf producers are very tentative to replace cows with this kind of cow cost and the risk of making the investment in a $1,000-plus replacement female,” he says.

He calculates, to get a 2% return on a $1,300 purchased bred heifer, and assuming a $400 annual cow cost, you’d need $1.18 on a 525-lb. calf. Jump that cow cost to $550 and you’d need $1.50 for her calf.

So what are the keys to increasing cow numbers? “I’m not sure we can, but there are some areas that might have possibilities,” he says.

One is, obviously, to increase profitability. “You might think increased price is going to be the key to that. Not necessarily, in my mind. Increased prices would be great, but decreasing costs may be equally or more important because it takes some of the risk out of it for producers. If we can lower costs for feed, fuel and fertilizer that went up dramatically, I would argue by the renewable fuel policies, then that would be a big benefit.”

Another way to boost cow numbers is to develop programs to connect ranchers with the new breed of landowner who buys ranches for recreational or environmental reasons. “We have this landowner who doesn’t know about cows and we have cattle producers who need land,” Swigert says. “Somehow we’ve got to get them together.”

That’s happening in Florida, says Wes Williamson, owner of Williamson Cattle Company, an 8,000-head operation in Okeechobee. Williamson says that between land speculators buying ranches to grow houses, recreational buyers looking for a place to hunt and state agencies and water districts buying land for environmental reasons, lots of cows have left production.

“The water management districts and state agencies have spent a tremendous amount of money buying private property to store water,” he says. In the past, when that happened, the cows left, never to return. But with the help of the World Wildlife Fund, Florida ranchers developed a program called the Florida Ranchlands and Environmental Services Project.

“What we developed (is a program to) let ranchers keep the land, keep it in production and on the tax rolls, and let them provide that service,” he says. “So it’s basically to store water on ranches, which could decrease your carrying capacity a little bit, but it increases your resource and diversifies your income. It’s really been encouraging for me to see some of those environmental groups recognize what a good use of the land that cattle ranches are,” Williamson says.

And the process taught him something, too. “It’s pretty easy to stay on a horse out in the woods and have a them vs. us mentality. It’s a lot more productive to sit down and talk with them. I think if they see exactly what we do, they’re going to be a lot more supportive of our business and our industry.”-- Burt Rutherford